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2005 (9) TMI 244 - AT - Income TaxIncome Escaping Assessment - Assessment order framed u/s 143/147 - reason to believe - Validity of the notice issued u/s 148 - Whether merely because, no notice u/s 143(2) was issued by the Assessing Officer after issuing intimation u/s 143(1)(a), the Assessing Officer is not competent to initiate reassessment proceedings. If so, whether the scope of inquiry in such reassessment proceedings will be limited? - HELD THAT:- There is nexus between the material/information, which was before the Assessing Officer and the formation of belief on the basis of such material. It is a settled law that adequacy of material is not relevant for having reasons to believe. Thus, on the basis of the facts as conveyed through the letter referred to above, the Assessing Officer was justified in having reasons to believe that the income of the assessee chargeable to has escaped assessment. It may be pointed out that during course of assessment proceedings also, the Assessing Officer raised several queries, which are related to huge deposits in the accounts of the assessee in the financial year relevant to assessment year under consideration. In this regard reference may be made to the notices issued by the Assessing Officer under sections 142(1) and 143(2) of Income-tax Act and detailed replies of the assessee for explaining these deposits. These letters of the assessee are available in Paper Book at Page. Thus, the notice issued by the Assessing Officer is found to be fully valid. Issue No. 1 is, therefore, decided in affirmative and accordingly. According to the Hon'ble Court in the case of Damodar H. Shah v. Asstt. CIT [2000 (6) TMI 27 - GUJARAT HIGH COURT], distinction between u/s 143(1)(a) and 143(3) is well brought out by the statutory provisions as stood at different points. The Hon'ble Court has also considered the effect of change brought by the amendment with effect from1st April 1979in the scope of u/s 147. Thus, it is clear that reassessment proceeding can be initiated after intimation u/s 143(1)(a) is issued and such proceedings will not be barred merely because, notice u/s 143(2) of Income-tax Act was not issued after the intimation u/s 143(1)(a) within the prescribed period. On the basis of our discussion and findings recorded while adjudicating various issues formulated in this matter, the following preposition may be culled out: (1) The proceedings u/s 148/147 can be initiated if the Assessing Officer has reasons to believe that any income chargeable to tax has escaped assessment. The only requirement is that at the stage of initiation of such proceedings there must exist some grounds or material for formation of the belief and there should be nexus between such grounds and reason to form belief that any income has escaped the assessment. (2) The reopening cannot be held to be invalid merely because in the ultimate analysis no escapement of income is found in relation to any ground on the basis of which proceedings for reopening were initiated. In other words if there was requisite material for assumption of jurisdiction at that stage but the same could not substantiated during reassessment proceedings, then proceedings u/s 147 cannot be held to be invalid. (3) The reassessment proceedings may be initiated on one ground but the reassessment may be done on any other ground, if such ground comes to the notice of Assessing Officer during the course of assessment proceedings. It is, therefore, open to the Assessing Officer to consider other items even though they were not included u/s 148. (4) The intimation u/s 143(1)(a) cannot be treated to be an order of assessment and so long as ingredients of section 147 of the Income-tax Act are fulfilled, the Assessing Officer shall be free to initiate proceedings u/s 147 and failure to take steps u/s 143(2) will not deprive the Assessing Officer in exercising jurisdiction u/s 147 of the Income-tax Act. (5) In reassessment proceedings, the whole of the original assessment is not set aside and the reassessment is to be made only in respect of escaped income which is under assessed. (6) During the proceedings of reassessment u/s 147/148, the Assessing Officer is not empowered to make robbing and fishing inquiries and to make general inquiry or to seek general information in relation to the return filed by the assessee. (7) The item of income on which reassessment is made must bear the characteristics of escaped income. The touchstone, therefore, is that reassessment can be made only of income which has escaped assessment and which is under assessed. (8) The Assessing Officer can exercise power u/s 147 in relation to other items of income which were not the basis for formation of belief or reasons to believe for issuing notice u/s 148 but for assessing such income he should indicate that any material or information has come to his notice during reassessment proceedings through external or internal source but he cannot reassess any item of income only after gathering general information or on conducting general probe from the assessee during the course of reassessment proceedings. Thus, it is clear that the term 'any income' has been used intentionally in this provision and it cannot be taken into 'entire income' or total income. The word 'such income' also qualifies 'any income'. Similar interpretation can be made of the various clauses of Explanation 2 to section 147. The deemed escaped assessment can be inferred where income chargeable to tax has been under assessed. In view of the above observations, Issue No. 3 is decided accordingly. In the result, the appeal stands allowed.
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